Chapin spoke for the CEO Summit at Villa Maria Estate last week. In his talk, he foregrounded Casper not as a mattress retailer, but as the first “sleep lifestyle company”, positioning it alongside Lululemon, Nike and Wholefoods.
Chapin summarises its mission as, “We want to help you dream your way to a better life.”
Before Casper was launched in April 2014, Chapin says, he’d noticed the emerging wellness trend, and realised there was a gap in the market for a market-leading company that focused on sleep as an aspect of overall wellness.
When it launched, Casper went to market with a single style of foam mattress sold in six US sizes and compressed into a box for easy shipping. The team had manufactured 150 mattresses by launch day, but within the first few hours, 193 had already sold. Chapin says it took two years for Casper to get on top of its back-orders.
The company had sales of US$1 million in the first month; US$100 million in 2015; and US$300 million in 2017.
Due to its core direct-to-consumer business model, Chapin says Casper can offer a lower price point than mainstream competitors. The original Casper mattress is priced at US$995 for a Queen size, with free shipping in the US and Canada. Casper has since expanded into selling bedlinen, pillows and other logical add-ons.
“We can sell a very nice product at a price that’s 40 percent of the equivalent quality,” Chapin says.
For a long time, Chapin says, Casper held no inventory and simply shipped its product directly from the factory to customers. It was always cashflow-positive, too.
“This is an incredibly simple business,” Chapin says. “Building a website that just sells one thing is actually pretty darn easy.”
Casper’s astonishing success was helped by the state of the traditional mattress industry at the time of its launch. Chapin has identified nine key areas where Big Mattress is slacking off:
- Terrible shopping experience.
- Complexity of choice.
- Knowledge mis-match between sales representative and shopper.
- Useless in-store trial.
- Buyer’s remorse.
- Low value for money.
- Transactional relationships.
- No brand relevance.
- Not in cultural dialogue.
Key among these, Chapin says, is the complexity of traditional mattress products. The vast array of mattress products is difficult for customers to get their heads around, particularly when they’re not shopping for mattresses often.
“You might be in the market once every seven to 10 years for a mattress, and it’s not something you spend seven years staying up to date on.”
This gives the salesperson a “real advantage” over customers, creating a transactional relationship which leaves shoppers feeling fleeced. Instead, Casper put effort into creating a customer relationship and building trust.
“We weren’t talking about great innovation in the product itself – the innovation as in product experience.”
“We basically did the exact opposite of what everyone else was doing.”
Chapin says the company deliberately avoided hiring staff from any aspect of traditional mattress sales. Its manufacturing staff were from General Electric and Toyota, and the sales division was renamed “product consulting.” Sales staff are non-commissioned.
“Their literal task is to understand and solve peoples’ problems.”
Casper’s focus on customer retention has resulted in a 10 percent repeat purchase rate. Chapin says lifetime customer value is a key metric in the venture space: “We will sink or swim in terms of company value on what that number is.”
At the same time as Casper was out-performing its competitors, Chapin says Casper’s marketing was raising consumers’ expectations: “priming them to have a bad experience and then they’ll come back to us.”
One of Casper’s early strategies was to “look a lot bigger than we were”, Chapin says. Before its launch, the company hired not one but two PR firms, at a cost of US$25,000 per month, to promote it.
“It was a big thing to bite off,” says Chapin. “We have a highly researched product. People will visit our site, or call our staff, three, four, five times before buying… this means human interaction is important.”
In addition to this, Casper invested in four writers to run the now-defunct branded content website Van Winkle’s, which aimed to raise awareness about the importance of sleep through stories. Subsequently, Chapin says, he’s noted a change in the way US culture relates to sleep, referring to the rise of a “napping culture”.
Another marketing angle is the way Casper has created “tools for customers to tell stories about Casper”. Chapin says he was aware of an existing trend for filming “unboxing” videos of consumer goods like Beats by Dre headphones on YouTube: “We didn’t fully anticipate that we’d get that for a mattress, but we did, and then we encouraged it.”
Casper has also used influencers, notably Kylie Jenner. Jenner reportedly charges hundreds of thousands of dollars for paid posts, but Chapin says Casper did not pay for the below post. Instead, the Casper team monitored her social media feeds, noted that she was about to move into a new home, and gifted her two mattresses.
While Casper began as an e-commerce site, it now has 18 physical locations around the United States, plus a partnership with discount homewares retailer Target. Chapin says the company uses its LA showroom primarily to “socialise” with customers, holding yoga classes; events; and providing a platform for social sharing.
It also made a “napmobile” to take to what Chapin refers to as “culturally relevant” places, such as the SXSW festival.
“We frequently will do cultural events, yoga classes, activities that will allow us to connect with customers.”
He has a theory that cultural fragmentation in the US has led to consumers seeking a sense of their personal identity through the brands they consumer. Chapin has noticed a retreat from overtly brand-dominated “logo culture” towards a subtler iteration which is no less commercially led.
“Part of their self-identity comes from the brands they’re living with day-to-day,” he says of consumers.
A flood of copycats pushed Casper into the second stage of its growth in 2017. Chapin estimates there’s currently more than 80 retailers imitating Casper’s model, including some in the New Zealand market. He singles out Ecosa and Koala as two of the most direct duplicates: “We put a lot of effort into graphic design and if you look, it’s just been ripped right off,” Chapin says of both companies. “It’s fine, it makes us better.”
The key to this update lies in the update to Casper’s mission statement: “Only Casper can help you dream your way to a better life.”
To enact this promise, Casper set about making its product less imitable, investing in R&D to create a more ergonomic mattress named The Wave. Ideas from The Wave’s construction were also implemented at a lower cost into Casper’s original mattress.
“Now, we have something unique – we can file IP on this,” Chapin says.
Its unique free white-glove delivery, and free removal if the customer takes Casper up on its 100-day guarantee, is facilitated by a network of five factories around the US. The policy wasn’t part of Casper’s early days, when product was shipped via UPS, but was created to build customers’ trust while shoppers were still taking a chance on a new brand.
Chapin says its logistical challenge now acts as another barrier to copycats: “Anything that’s large is really complicated to ship… [Logistics networks] are hard to build, so our competitors don’t often have them.”
They’re also hard to manage, however. Chapin notes that four out of five of Casper’s customer complaints are logistics-based.
When the 100-day returns policy was launched, the Casper team didn’t know what the return rate would be. Chapin says a rate of even 10 percent would’ve put Casper out of business, but the risk paid off.
“[The return rate] is a significant thing for us that we try to manage down, but it’s not at a point where it’s endangering the company.”
The company is still figuring out how to move into promoting this more technical product without losing the simple messaging and “whimsy” that form the core of Casper’s branding. It’s also working on developing a unique lighting product, a project which dates from the early days of Casper but fell behind in the face of overwhelming consumer demand for the core product.
This story was orginally published on The Register.